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Barclays has backed European equities to hit new highs in 2021, with 13% potential upside for the Stoxx 600 and two stocks offering more than 50% potential returns.

In their 2021 outlook, equity analysts at the bank said a stock market rally would mostly be driven by earnings-per-share growth, with high-efficacy vaccines bringing the Covid-19 pandemic under control and a return to normality bringing about a strong upswing for cyclical stocks.

Barclays economists see global GDP (gross domestic product) growth of 5.4% next year, the sharpest since 2010, which they project will facilitate around a 45% rise in earnings for European corporates from their currently depressed levels.

Barclays’ biggest overweight stock for 2021 is oil major BP, for which it sees 63.7% upside potential, followed by Dutch bank ABN Amro with 50.6% and British telecoms company BT Group with 47.2%.

The year’s biggest losers are expected to be Lufthansa, for which Barclays sees a -46.1% potential downside, Dutch payment company Adyen (-34.1%) and British online supermarket Ocado (-30.5%).

“Central banks and governments have ammunition left to help sustain the recovery, financial conditions are favourable, and there is pent-up demand given resilient disposable income, high savings and recovering profits,” Emmanuel Cau, head of European equity strategy at Barclays, said in the report.

Cau acknowledged that the short-term outlook remains uncertain as vaccine rollouts and the long-term societal impact of the pandemic are still up in the air, while a recent bullish run for markets has left less room for positive surprises.

However, Barclays does see room for continued rotation away from “relative safe havens” such as bonds, cash, developed markets, U.S. growth and defensive stocks into lesser-owned riskier assets, such as emerging market and European equities, cyclical and value stocks.